In this file:
· McDonald's CEO Acknowledges Image Problems After Tough Results
· McDonald’s Vows Fresh Thinking
· Macca's exporting Aussie beef
· McDonald’s China Challenge: Rising Competition
McDonald's CEO Acknowledges Image Problems After Tough Results
via International Business Times - October 21 2014
(Reuters) - McDonald's Corp (MCD.N) Chief Executive Officer Don Thompson owned up to some corporate image problems on Tuesday after it posted a nearly one-third drop in quarterly profit and warned that its global restaurant sales would fall again this month.
Stock in the fast-food chain, which Thompson conceded is sometimes seen as little more than "a manufacturing plant," was down 0.6 percent at $91 in afternoon trading after reporting a 30 percent fall in third-quarter net income to $1.07 billion and traffic declines in every major region.
Thompson, who has been CEO for just over two years of his 25-year career at McDonald's, said the company that now serves some 70 million customers a day worldwide has at various times during its history faced questions about whether it is still relevant to consumers, who are now craving more fresh, unprocessed food.
"McDonald's is in the business of satisfying customers and that will never fall out of favor. The question is what do you do to do that?" Thompson asked Reuters in a telephone interview.
McDonald's has posted a string of disappointing results, due to uncontrollable factors and internal missteps, since Thompson took the helm in July 2012.
Wall Street analysts, many of whom underscore McDonald's deliberate business style, predict that the company will give Thompson at least a year to move the needle.
To that end, Thompson said McDonald's is simplifying menus, tailoring food to local tastes, offering custom burger and sandwich options, rolling out mobile services such as payments and ordering, and opening a social media "dialogue" with customers.
Technology has made customized ordering simpler and will give McDonald's the opportunity to showcase its fresh produce and other ingredients, Thompson said.
Last week, McDonald's launched a U.S. online campaign called "Our food. Your questions." and invited consumers to ask anything about its food. It opened the campaign by directly addressing food-quality rumors with questions such as: "Is 'pink slime' in a Chicken McNugget?" "Why doesn't your food rot?" "Are there worms in your beef?"
Thus far, the response has been mixed...
McDonald’s Vows Fresh Thinking
After Steep Drop in Profit, Burger Chain Eyes the Customized-Food Bandwagon
By Julie Jargon - WSJ.com
via Google Oct. 21, 2014
McDonald’s Corp. outlined plans for what it called fundamental changes to its business as it reported one of its worst quarterly profit declines in years, driven by problems in nearly every major part of its business.
The 30% decline in net income for the period ended Sept. 30 was the latest in a string of disappointing results for the world’s largest restaurant chain. It is struggling with weak sales in Asia, Europe and, most important, its home market in the U.S.
In the U.S., an increasingly complicated menu has slowed service and McDonald’s once reliable base of younger customers have defected to fast-casual chains boasting customized ordering and fresh ingredients, including Chipotle Mexican Grill Inc., and specialty-burger places such as Five Guys.
McDonald’s has focused so far on efforts including increased staffing at busy times, and has shaken up its management ranks, including replacing the head of its U.S. business for the second time in less than two years. But the changes have yet to boost sales or profit.
The 4.1% decline in McDonald’s September U.S. same-store sales marked the worst monthly U.S. same-store sales performance since February 2003.
In response, McDonald’s Chief Executive Don Thompson on Tuesday said it would simplify its menu starting in January, in part to remove low-selling products, and plans to give the company’s 21 domestic regions more autonomy in rolling out products that are locally relevant.
By the third quarter of next year, McDonald’s also plans to fully roll out new technology in some markets to make it easier for customers to order and pay digitally and to give people the ability to customize their orders, part of what the company terms the “McDonald’s Experience of the Future” initiative.
“The key to our success will be our ability to deliver a more relevant McDonald’s experience for all of our customers,” Mr. Thompson said. “Customers want to personalize their meals with locally relevant ingredients. They also want to enjoy eating in a contemporary, inviting atmosphere. And they want choices in how they order, choices in what they order and how they’re served.”
McDonald’s thrived through the global economic downturn. In the decade from 2001 to 2011, sales nearly doubled and profit more than tripled. But Mr. Thompson, who helped drive that growth as head of McDonald’s U.S. business, has confronted a series of challenges since taking the top job in July 2012.
In China, a scandal at one of its meat suppliers has shaken customer confidence, driving same-store sales down 9.9% in the latest quarter in McDonald’s Asia/Pacific, Middle East and Africa region. In Europe, broader economic softness was compounded by political complications in Russia, where authorities have been inspecting and, in some cases, shutting McDonald’s restaurants—moves widely seen as retaliation for U.S. sanctions in response to Russia’s military incursion in Ukraine.
The problems in China and Europe are considered to be short term. McDonald’s said it would be another six to nine months before the China business fully recovers. But the U.S. market, which accounts for roughly 40% of its more than 35,000 global restaurants, is facing a fundamental shift in the way Americans buy food. Young consumers, in particular, have been flocking to fast casual restaurants such Chipotle and Panera Bread Co.
Mr. Thompson said he knows consumers want more transparency about the source of ingredients. McDonald’s recently launched a social-media campaign in which it offers to answer questions about its food, and he said McDonald’s is considering offering organic food in some markets.
“We recognize that we must demonstrate to our customers and the entire McDonald’s system that we understand the problems we face and are taking decisive action to fundamentally change the way we approach our business,” he said.
Analysts who participated in McDonald’s earnings call on Tuesday remained skeptical about whether the company can address bigger shifts in consumer behavior and win back younger customers without a major overhaul of the menu to include healthier fare.
Tony Scherrer, director of research at Smead Capital Management, which owns more than 150,000 McDonald’s shares, applauded the efforts. “To add some components that would give you a sense of local feel and health and for them to brand it as such would speak to the demographic they’ve missed out on,” he said. “For people to expect McDonald’s to change their lineup in order to become a Chipotle is unreasonable.”
Edward Jones analyst Jack Russo said that while people want variety, customizing menu items at a chain that derives about 70% of its sales from the drive-through could slow service even more. And becoming more healthful isn’t a panacea, he said, especially for a chain that has already tried adding salads, fruit smoothies and oatmeal to its menu with little traction...
Macca's exporting Aussie beef
VERNON GRAHAM - The Land (AU)
22 Oct, 2014
FAST food giant, McDonald’s, now exports more Australian beef than it uses in its 930 local restaurants.
Andrew Gregory, chief executive officer of McDonald's Australia, said the company now exported 41 million kilograms of beef a year, mainly for company use in the United States, South Korea and Japan.
On Tuesday McDonald’s released its new Rump Steak Range which uses rump strips in its ranges of wraps and salads.
Mr Gregory said high-quality, locally-sourced produce was one of the key ingredients in the company’s Australian success story.
He told the National Farmers' Federation (NFF) Congress in Canberra that the company had listened to its customers who wanted more transparency about what was in McDonald’s food and where and how it was produced - and they were interested in animal welfare and sustainability. Mr Gregory said the company wanted to buy its beef from sustainable production systems but was committed to working with producers to accurately define what “sustainable” meant.
McDonald’s had now set out to dispel some of the myths about its foods, including fears its milk shakes contained pig fat and the apple filling in its pies contained chokos.
McDonald’s had opened new online and digital communication channels including the mobile app, Track My Macca’s, and the online tool, Our Food, Your Questions, so customers could ask tough questions about the food they were eating and get information about where it was grown.
Mr Gregory said the company was continuing to innovate...
McDonald’s China Challenge: Rising Competition
No Longer the Only Western Chain in Town, U.S. Fast-Food Chain Struggles to Keep Up
By Laurie Burkitt - WSJ.com
via Google - Oct. 22, 2014
SHANGHAI—Echo Chen, a onetime McNuggets aficionado, represents the growing challenge McDonald’s Corp. faces as it looked to revive its fortunes in China.
The 30-year-old Shanghai native said 10 years ago, she felt excited when she went to McDonald’s” “I was young and it was new to me.” But since then, restaurant offerings have proliferated in Shanghai, giving customers choices ranging from Yum Brands Inc. ’s KFC to local chain Zhen Gong Fu.
“There’s much more now,” Ms. Chen said.
The Oakbrook, Ill., burger chain on Tuesday reported its sharpest quarterly profit drop in seven years amid problems in a broad range of businesses and areas. Prominent among them is China, where a scandal at one of its meat suppliers caused a product shortage, limiting menu options and crippling sales in China, Hong Kong and Japan.
McDonald’s doesn’t break out sales by country, but its China problems helped drive its same-store sales down 9.9% in the quarter ended Sept. 30 in its Asia/Pacific, Middle East and Africa region.
Analysts say the food-supply problem was temporary and that McDonald’s and others have bounced back after previous quality issues. But McDonald’s has a bigger problem in China, said Ben Cavender, senior analyst at China Market Research Group: Rising competition, both foreign and domestic.
A decade or two ago, many Chinese consumers were drawn to McDonald’s because it was their first Western dining experience or first time to eat out of the home, he said. Since then, “the company went from being a cool option to just another choice in the market.”
Rivals are rapidly expanding across China. Chains like Dicos, owned by Taiwanese Ting Hsin International Group, run more than 2,000 fried chicken stores in China. Guangzhou Real Kungfu Catering Management Co., also known as Zhen Gong Fu, sells individual rice and meat dishes in around 500 stores across China.
In less-developed cities, the American burger chain is facing increased competition from local operators like Hua Lai Shi Catering Management & Service Co., which has opened 3,000 stores selling fried chicken and french fries.
A spokeswoman said McDonald’s remains a top brand in China...